Treaty of Tordesillas

Economies of scale help ride-hailing apps gain dominance. By trading its Chinese unit for a stake in local rival Didi, Uber is creating value but also conflicts of interest. Lags in antitrust law are one more aspect of regulation for Uber – and others – to take advantage of.

Context News

Uber said on Aug. 1 that it would swap its Chinese subsidiary for a 20 percent stake in local rival Didi Chuxing, a deal that an unnamed Reuters source said would value the combined company at $35 billion.

Didi also will invest $1 billion in Uber as part of the exchange. Uber Chief Executive Travis Kalanick will join Didi's board of directors and Didi Chuxing CEO Cheng Wei will join Uber's board.

"Sustainably serving China's cities, and the riders and drivers who live in them, is only possible with profitability," Kalanick wrote in a Facebook post. "This merger paves the way for our team and Didi's to partner on an enormous mission, and it frees up substantial resources for bold initiatives focused on the future of cities - from self-driving technology to the future of food and logistics."

Didi was created in 2015 by merging firms backed by Alibaba and Tencent. It has invested $100 million in Lyft, Uber's main rival in the United States. Didi has also formed an alliance with Lyft, India's ride service Ola and Southeast Asia's ride-hailing startup Grab in an effort to compete with Uber.